Startup or FAANG: Solving the Dilemma for FIRE and Asymmetric Returns

Picture this: the gleaming FAANG towers, the cushy office chairs, and the steady stream of paychecks that put our financial worries at bay. It’s a life many covet—a career trajectory that spells stability and success. Yet, lurking beneath this picture-perfect façade, there’s a restless whisper—a whisper that yearns for something more, something that truly ignites the soul.

I get it, trust me. As someone who’s worked in early and now mid stage startups and have friends in various FAANG companies, I know the allure of startups is real. For a FIRE achiever, that presents the inevitable dilemma of trading off a steady income with asymmetric returns of startups. Let’s dive into how the startup life aligns with your pursuit of Financial Independence, Retire Early (FIRE).

The FAANG Comfort Zone and Startup Temptation

If you currently work in big tech, you’ve savored the perks of a FAANG position.

Within the polished walls of FAANG companies, mid-career professionals revel in the luxury of stability. A steady paycheck and the luxury of liquidity create a comfortable cocoon. Yet, many friends in FAANG have shared their lack of fulfillment within the clockwork rhythm of corporate life.

The allure of startups beckons with promises of more than just a job. It offers the opportunity to work on challenges close to one’s heart, to assume responsibilities that extend beyond a job description, and to experience accelerated professional growth. It’s a life where agility and adaptability reign supreme, and where each step forward is a plunge into the unknown—a realm of limitless possibilities.

Timing Is Everything: When Not to Make the Switch

But before you dive headlong into the startup vortex, let me share some real-talk moments from my journey. San Francisco’s tech scene has its seasons, much like nature. There’s the spring of hype, where startups blossom and valuations reach for the sky. But let me warn you, as enticing as it seems, this can be a trap. High valuations often come tumbling down, and startups are often the first to feel the ground shake.

I’ve seen friends—bright minds who once thought they’d found the golden ticket—suddenly face layoffs and uncertainty. It’s like a sobering reality check. If marriage is on the horizon or significant expenses are expected, the financial risk of a startup venture might be more than you’re willing to bear. Similarly, for women in their childbearing years, the uncertainty and demanding nature of startups might not align well with the need for a stable and supportive environment.

Three Approaches to Embracing the Startup Challenge

Approach 1: Specialization and Seniority – Joining a Team Aligned with Your Expertise

Imagine this: you’re knee-deep in your FAANG career, you’ve got skills that could make Silicon Valley blush, and you’re feeling that spark for something more. Well, how about finding a startup that practically shouts your name? I’m talking about a gig that’s like a custom-made suit for your skills—a perfect fit.

It’s not just about a job title, it’s about grabbing the reins of responsibility and wrangling them like a pro. I’ve seen friends who’ve done exactly that. They’ve walked into startups that needed their expertise like oxygen. And what did they do? They negotiated a significant title bump. On top of that, they’ve landed a handsome package of stocks that could potentially outshine even the most coveted FAANG shares.

Approach 2: Reaching FIRE/FatFIRE and Seeking Risk

For all the FIRE achievers, you’ve crunched the numbers, you’ve built the safety net, and suddenly you thought, “Why not?” 

I’ve known some friends who’ve waited for this precise moment. They’ve reached their FIRE or even the luxurious FatFIRE number. They’re ready for the thrill of taking calculated risks. They’re diving into startups, knowing they’ve got their financial cushion beneath them. It’s like stepping into the unknown with a safety net.

Approach 3: The Two-Year Excursion

For those who may not have found their C level role at a startup, or still far from reaching FIRE/FatFIRE, that doesn’t mean you can’t enjoy the startup ride for a while. I have seen another approach where people oscillate between startups and big tech, every 2-4 years. 

They join startups with this plan. They immerse themselves in the thrill of startup life—late nights, all-hands-on-deck situations, and the exhilarating feeling of making a dent in the universe. And then, after a wild ride, they return to the stability of big tech, armed with a newfound perspective and a career enriched by startup escapades.

Chasing the Asymmetric Returns of Startups 

This is the classic tale of steady wins versus the lure of asymmetric returns. 

That’s why, when joining a startup, aim to join as a cofounder or as senior as possible. Optimizing for equity, is the name of the game. “Always better be the last cofounder than the first employee.” Even as the last cofounder, the equity can be somewhere between 10% to 20%. A first employee usually lands a maximum 1/10th or 1/20th of that. Yet the risk they face at that early stage of the company is roughly the same. 

While FAANG might offer stability, startups offer the thrill of the unknown. As you navigate this crossroads, consider your career, financial building journey, and your risk tolerance. 

Have you moved from a stable well paying big tech job, to pursuing a startup? If so, what is/was your experience?

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